Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/157959
Authors: 
Grodecka, Anna
Kotidis, Antonis
Year of Publication: 
2016
Series/Report no.: 
Sveriges Riksbank Working Paper Series 316
Abstract: 
We investigate the effects of the abolition of double liability requirement imposed on bank shareholders in Canada on bank risk-taking and lending behavior. Under the double liability rule, the shareholders of a bank were liable up to twice the amount of their subscribed shares in the case of bankruptcy. With the establishment of the Bank of Canada in 1934, the double liability requirement became less stringent and depended on the pace of the redemption of notes in circulation issued by the individual chartered commercial banks. Using historical balance sheet and accounting data, we show that the abolition of double liability was not accompanied by increased bank risk taking in Canada. Our findings are consistent with the literature that focuses on uniform regulations and nationwide branching as key financial stability elements in Canada.
Subjects: 
Double Liability
Bank Risk-Taking
Leverage
Canadian banks
Financial Stability
JEL: 
E44
G21
G28
N22
Document Type: 
Working Paper

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